Analyst Picks & Pans

Stock Picks: MasterCard, Comcast


MasterCard (MC)

Keefe, Bruyette & Woods maintains outperform; raises estimates, price target

KBW analyst Sanjay Sakhrani lifted earnings estimates on MasterCard on Nov. 4 after the company's "solid" earnings results.

"We think results were solid, particularly in light of continued weakness in consumer spending and broader macroeconomic weakness," the analyst wrote in a Nov. 4 note. Sakhrani thinks that MaterCard and Visa (V) remain attractive investments to the extent global consumer spending improves in the near future. The analyst also thinks there are "tailwinds" into 2010 for MasterCard in the form of gas prices, a weaker U.S. dollar and easier comparisons.

"These, coupled with the fact that the company continues to rationalize its cost base, should allow the company to post solid earnings growth," the analyst wrote.

Sakhrani lifted earnings per share (EPS) estimates for 2009 to $11.33 from $11.15 and for 2010 to $13.40 from $13.00), and raised a 12-month price target to $237 from $229.

Comcast Corp. (CMCSK) (CMCSA)

Standard & Poor's Equity Research keeps strong sell

S&P equity analyst Tuna Amobi said on Nov. 4 that Comcast's third-quarter EPS of 24 cents (before a 9-cent tax benefit) were 3 cents shy of his estimate and one cent below the Wall Street consensus view. But Amobi noted significant improvement in third-quarter unit growth of nearly 1.1 million, almost matching the figure for the first half of 2009, with gains in digital, data and voice far outweighing further basic subscriber losses. "Pricing power also seems to be holding up in a highly competitive environment," he wrote in a Nov. 4 note.

Still, Amobi noted that improved fundamental sentiment could be overshadowed near-term by capital allocation questions, amid evidently advanced talks for Comcast to gain potential control of General Electric's (GE) NBC Universal unit. C.R. Bard (BCR)

Deutsche Bank upgrades to buy from hold; raises price target

A Deutsche Bank analyst recommended investors buy shares of C.R. Bard Inc., saying the medical-device maker's vascular and hernia products will drive growth. Damergy also raised his price target to $88 from $78.

"When we initiated [analytical coverage] in July, we cited revenue growth deceleration, urology uncertainties, hernia share losses, and a premium valuation as reasons to stay away," he said, in a note to investors. "Those headwinds have subsided and with a significant foreign exchange tailwind into next year, we believe underlying growth trends will improve."

He cited potential for growth from vascular devices, which include catheters and stents, along with hernia devices.

"We were encouraged to see progress in the third quarter within the hernia franchise and continued strength in the vascular division," he said.

Meanwhile, he was more cautious on the Murray Hill, N.J., company's urology and cancer products, but expects sales trends to improve in 2010.

STEC Inc. (STEC)

Oppenheimer & Co. downgrades to perform from outperform

Shares of Stec Inc. tumbled Nov. 4 after the company gave a weak outlook for the rest of the year and investors fretted about rising competition.

Stec reported a 20-fold increase in third-quarter profit after the close of trading Nov. 3, with revenue up by 54 percent to $98.3 million.

But the company's revenue forecast for the rest of the year fell short. It projected sales of $101 million to $103 million for the quarter ending in December. Analysts polled by Thomson Reuters were looking for $106 million, on average.

Oppenheimer & Co. analyst Gary Hsueh cut his rating on the shares in a note to clients Nov. 4, warning of increasing competition next year. He said the company is having trouble developing new business. And inventory is high at one customer, EMC Corp., which could lead to a "sizable downtick" in sales during the first quarter of 2010, Hsueh said.

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